Material Agreement (Form 8-K)

Item 1.01 Entry Into a Material Definitive Agreement

On December 19, 2025, Tectonic Financial, Inc. (the "Company") entered into a Separation Agreement and Plan of Distribution (the "Separation Agreement") with Tectonic Advisors, LLC, a Texas limited liability company and wholly owned subsidiary of the Company ("Spinco"), and certain equity owners (the "TA Continuing Shareholders") of Cain Watters & Associates, LLC ("Cain Watters"). Cain Watters also joined in the Separation Agreement.

The Separation Agreement

The Separation Agreement provides for a series of transactions pursuant to which, among other things, the Company will separate the business, operations, assets and liabilities of Spinco (the "Spinco Business") from the Company's organizational structure and transfer the Spinco Business to Spinco, subject to the terms and conditions set forth in the Separation Agreement (the "Separation"). After the Separation, the Company will distribute all of the equity interests of Spinco to the TA Continuing Shareholders, subject to the terms and conditions set forth in the Separation Agreement (the "Distribution").

Pursuant to the Separation Agreement and in connection with the Distribution, the Company will distribute 100% of the membership interests in Spinco to the TA Continuing Shareholders in exchange for (i) 1.53 million shares of common stock of the Company, par value $0.01 per share (representing 22.25% of the fully diluted issued and outstanding shares of common stock of the Company as of the date hereof), currently owned by the TA Continuing Shareholders, and (ii) a promissory note issued by Spinco and payable to the Company in the amount of $35 million (the "Promissory Note"), which shall be unconditionally guaranteed by Cain Watters.

In accordance with the terms of the Separation Agreement, Spinco will refinance the Promissory Note immediately following the Distribution pursuant to a binding commitment from a third-party commercial bank. Proceeds from such refinancing will be used by Spinco to payoff the Promissory Note with the Company. The Company intends to use the proceeds from such payoff for general corporate purposes, which may include the repayment of all or a portion of its $12 million in principal of subordinated debt, the redemption of all or a portion of its $17.25 million in outstanding Series B Noncumulative Perpetual Preferred Stock, and the repurchase of shares of the Company's common stock. Any such repayment and/or redemption shall be subject to approval by the Company's board of directors and regulatory approval, as applicable.

Consummation of the transactions contemplated by the Separation Agreement, including the Distribution, are subject to various conditions, including, among other things, (1) the Company's receipt of a tax opinion from Hunton Andrews Kurth LLP, (2) compliance with laws and material agreements binding upon the parties, (3) the completion of all required securities filings, (4) the receipt of necessary consents and approvals, (5) the absence of legal restraints to consummate the transactions, (6) no event shall have occurred which, in the judgment of the Company's board of directors, would make it inadvisable to consummate the transactions, and (7) the execution and delivery of certain ancillary agreements and amendments.

In addition to the foregoing, the Separation Agreement also contains numerous other provisions relating to certain ongoing relationships among the parties, including indemnification, freedom to compete, sharing of information, treatment of nonpublic information, human resources, information technology, corporate records and dispute resolution.

The Separation and Distribution are intended to be tax-free to the Company and the TA Continuing Shareholders for U.S. federal income tax purposes, except for the cash proceeds received by the Company from the payoff of the Promissory Note.

The foregoing summary of the Separation Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Separation Agreement, which is filed as Exhibit 2.1 to this Form 8-K and is incorporated herein by reference.

In connection with the Distribution, the Company and Spinco have also entered into certain ancillary agreements, including a Tax Matters Agreement, Transition Services Agreement, and amendments to various intercompany service arrangements.